During the Obama administration, a ruling enabled several cities to create their own retirement plans to cover those employees who don’t have access to retirement plans through their jobs. Now, under Trump’s administration, the Senate has voted to undo the ruling. This means that Congress effectively prevents local and state governments from helping employees to get a retirement plan. The voting was extremely narrow as the resolution was approved 50 to 49.
All the Republicans except for Senator Bob Corker, who was against it and Senator Johnny Isakson, who was not present voted in favor of eliminating the rule. The resolution will become a legislation once Trump provides his signature. Cities such as Philadelphia, New York City and Seattle have taken measures to introduce savings plans for retirement accounts. Oregon, Illinois, California, Connecticut, Maryland, Washington and New Jersey have already initiated the process to start retirement plans run by the states.
Republicans oppose this plan because they don’t want the states and cities to take the additional responsibility. Many business owners are also against it because these plans may discourage several employers from creating their own retirement plans. Small businesses that operate in multiple cities should also face legal hurdles due to this ruling.
The Labor Department rule imposed in the past year exempted cities and states under the Employee Retirement Income Security Act. Two resolutions were passed in the House in February to eliminate these exemptions. On Thursday, the Senate has approved the exemption for cities and another voting will be scheduled to exempt the states too.
The supporters of the ruling argue that the city run retirement programs benefit workers who retire with very little money saved. The democrats are also in favor of the ruling and they couldn’t stop the resolution for the cities. However, the democrats are keen on convincing the senators to make sure that the resolution on state-run retirement programs is rejected. This is because the state run programs have deeper implications than city-run programs.
The Democrats haven’t lost hope because few Republicans don’t want to cancel the state-run retirement programs. The retirement programs run by the cities and states have helped workers by providing access to savings plans. AARP reported that more than 55 million Americans don’t have a retirement plan because they don’t have access to retirement accounts or pensions. The city and state-run retirement programs have an opt-out option to let go of employees who don’t want to save for retirement. For others, the contributions would be deducted automatically from their monthly paychecks. This retirement plan enables employees to rely less on social security benefits once they retire.
Scott M. Stringer, Comptroller of New York city commented that the Republicans succeeded in undermining the economic security of employees. This could also result in states spending more on funding programs like Medicaid later on. The voting could deter other states from launching their own retirement programs.